Polymer Vision R & D Ltd & Ors v Van Dooren

The bankruptcy exception in Article 1.2(b) of the Judgments Regulation applies where proceedings derive directly from bankruptcy and are closely connected with the insolvency proceedings. A claim is not outside the exception merely because it is pleaded in contractual or tortious terms, or because it seeks personal liability from an insolvency office-holder. The court must examine the substance of the dispute, including the office-holder’s statutory powers, supervision and conduct of the insolvency process. Proceedings concerning negotiations and a settlement governing the exercise of those powers may fall within the exception. Where the exception applies, the court may extend time to challenge jurisdiction, and the insolvency forum may be forum conveniens where the dispute concerns the administration of the insolvency and is governed by that forum’s law.

The claimants brought proceedings in England against the defendant, a Dutch bankruptcy trustee of an English-registered company, alleging misrepresentation and breach of collateral contract. The claims concerned statements made during negotiations about the claimant’s alleged security and priority rights and a settlement governing the sale and distribution of the insolvent company’s assets.

The defendant challenged jurisdiction out of time. He argued principally that the proceedings fell within the bankruptcy exception in Article 1.2(b) of the Judgments Regulation and were closely connected with Dutch insolvency proceedings. The central issue was whether the pleaded claims were independent civil claims or proceedings deriving directly from, and closely connected with, the bankruptcy.

1. The jurisdiction challenge was permitted. The defendant had indicated an intention to challenge jurisdiction when filing the acknowledgment of service. The delay resulted from solicitor’s inadvertence, the application was made promptly once the omission was identified, and the claimants showed no material prejudice. The merits of the jurisdiction challenge strongly supported an extension of time.
2. The bankruptcy exception applied. The applicable test, derived from Gourdain v Nadler [1979] ECR 733, asks whether the proceedings derive directly from bankruptcy or winding-up and are closely connected with the insolvency proceedings. The exception is construed narrowly, but factual rather than purely juridical derivation can suffice.
3. The court distinguished cases concerning pre-insolvency rights under general law. In those cases, insolvency merely transferred existing rights or liabilities to an office-holder. Here, the dispute concerned the defendant’s exercise of powers as trustee, the post-insolvency actio pauliana declaration, the preservation and sale of assets for creditors, and the settlement’s regulation of the future conduct of the bankruptcy.
4. The negotiations and settlement were therefore directly derived from, and closely connected with, the Dutch insolvency. The settlement depended on approval by the supervisory judge and concerned the defendant’s powers to admit claims, determine priority and distribute sale proceeds. The fact that personal liability was alleged did not alter that conclusion. The evidence indicated that personal liability of a trustee first required proceedings against him in his official capacity under the Maclou test.
5. The court did not need to decide the alternative issues under Articles 2, 5 and 23 of the Judgments Regulation. It indicated that Article 5.1(a) would probably have been satisfied, Article 5.3 probably would not, and the defendant had not shown that Article 23 supplied exclusive jurisdiction.
6. England was forum non conveniens. The claims concerned the exercise of powers under Dutch bankruptcy law, the settlement had been approved within the Dutch insolvency process, Dutch law governed the relevant agreements, and the Dutch courts were better placed to determine the dispute. The defendant’s principal application succeeded.